26 November 2008
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Johannesburg — IT MAY be tempting to look for value in agricultural companies, since the expected slowdown in SA's economic growth in the third quarter (to 0,2%) was in large measure mitigated by contributions to gross domestic product (GDP) from the agriculture, forestry and fisheries sector.
The value added to GDP by all industries - except farm, fish and trees - contracted 0,1%.
It might have been a good plan, too, if there were such a thing as a listed farm - save for the excessive volatility in the sector. If anything, it is a risky short-term bet.
The closest thing to a pure farm investment would be the chicken business - particularly companies such as Rainbow Chicken and Astral.
Rainbow recently reported revenue of R3,3bn½ for the half-year to September, a 15,9% increase, but operating profit fell 44,6%. This is in line with Astral , but Rainbow suffered because of the consumer slowdown, while input costs did the greater damage at Astral.
Clearly, there are more than chickens on the farm.
The Bottom Line is Edited By Edward West
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